Land Rent

Description

The Land Rent Scheme is part of the ACT Government's Affordable Housing Action Plan. The Land Rent Scheme gives a lessee the option of renting land through a land rent lease rather than purchasing the land to build a home.

The Land Rent Act 2008 (external site) is administered under the Taxation Administration Act 1999.

Under the scheme, purchasers of a single dwelling residential block (previously unleased land) sold by the Land Development Agency (LDA) have the option of applying for the crown lease to be issued as a land rent lease.  The advantage for potential lessees in taking up this option is the reduction of the up-front costs associated with owning a house. That is, lessees will not need to finance the cost of the land, only the costs associated with the transfer of the land (such as duty) and the construction of the home.

Land rented under a land rent lease is subject to payment of an annual land rent charge. In addition, the lessee will be liable to duty on the grant of the land rent lease, rates, and, if applicable, land tax.

Duty is payable on the land rent lease on the same basis as applies to the grant of a nominal crown lease. The dutiable value is not reduced by virtue of the lessees taking a land rent option.

Applicants for a land rent lease are encouraged to seek independent legal and financial advice on the Scheme.

For further information on the Land Rent Scheme see the Land Rent Leases and Duty Liability Information Sheet [RTF, 80Kb], [PDF, 419Kb].

Changes to the Land Rent Scheme

As of 1 October 2013, entrance to the Land Rent Scheme is restricted to low to moderate income households eligible for the discount land rent rate of 2 per cent.  The standard 4 per cent rate of land rent will no longer be available to new entrants to the Scheme (that is, entrants who obtain a land rent block where the land rent Crown lease is first granted under a contract entered into on or after 1 October 2013).

All lessees who are already in the Scheme prior to 1 October 2013 will be unaffected by these changes.  Those lessees who exchanged contracts with the Land Development Agency for a land rent block prior to 1 October 2013, but have not yet settled on the purchase, are considered to be pre-1 October 2013 entrants to the Scheme.

Participants already in the Land Rent Scheme, where the initial Crown lease was first granted under a contract entered into prior to 1 October 2013, are not restricted in any subsequent (secondary) transfer of the lease.  However, for land rent Crown leases first granted under a contract entered into on or after 1 October 2013, any subsequent (secondary) transfer of that lease must be to another purchaser who meets the determined criteria and is eligible for the discount rate of land rent.

If a lessee who has settled on a land rent block converts the land rent lease to a nominal rent lease (either at the time of on-sale or earlier), the restriction on transfer will not apply.

Applying for Land Rent

Before settlement on a land rent block, applicants must provide the ACT Revenue Office with an Application for Discounted Land Rent together with evidence that the total gross household income for the previous year is below the relevant threshold amount.

Applicants for a land rent block must also attend a CIT information session (external site) (see below for details).  Once applicants have attended this course, they must submit the Acknowledging Attendance statement to the LDA.  For land rent block availability, sales events and further information, please contact the Land Development Agency (external site).

Land Rent Eligibility – Leases first granted on or after 1 October 2013

For land rent leases where the Crown lease was first granted under a contract entered into on or after 1 October 2013, and for any subsequent transfers of such a block, applicants must meet the discounted land rent eligibility criteria:

  • Income: to be eligible for land rent, the total gross income of the lessee/s must be assessed by the ACT Revenue Office and must not exceed the income threshold of $160,000. Income is calculated on a household basis (that is, the income of a lessee and their domestic partner), and includes income from all sources, such as a second job, shareholder income, salary packaging benefits and short term higher duty payments. See DI2015-223 (Total income of lessees – post-1 October 2013 leases) for further information.
  • The income threshold is increased by $3,330 for each dependent child, as shown in the table below:
Number of dependent ChildrenTotal gross income threshold
0$160,000
1$163,330 
2$166,660
3$169,990
4$173,320
5 or more$176,650
  • Property Ownership: lessees who enter the Land Rent Scheme cannot own any other real property at any time while leasing a land rent block.  Ownership includes a legal and a beneficial interest.
  • Residency: at least one of the lessees who enter the Land Rent Scheme must reside in the property built on the block, once a Certificate of Occupancy has been issued.

Land Rent Payable – Leases first granted on or after 1 October 2013

Land rent lessees who obtain (by grant or transfer) a land rent block on which the Crown lease was first granted under a contract entered into on or after 1 October 2013 must meet the above criteria and therefore be eligible for the discount rate of land rent.

Once a lessee has settled on a land rent block, annual land rent payments to the ACT Revenue Office are required, and are based on the unimproved value of the block.  The land rent payable is 2 per cent of the unimproved value of the leased land. For further details of how the unimproved land value is determined see Land valuations.

For land rent leases first granted under a contract entered into on or after 1 October 2013, lessees are not able to access the standard 4 per cent rate of land rent.  Should a lessee become ineligible for the discount rate, they may be required to transition out of the Land Rent Scheme (see information below).

Ongoing Eligibility – Leases first granted on or after 1 October 2013

Once a lessee has obtained a land rent block (for which the Crown lease was first granted under a contract entered into on or after 1 October 2013), they must continue to meet the eligibility criteria for the discounted land rent to remain in the Scheme.
If a lessee's circumstances change and the income threshold amount is exceeded for two consecutive years; the lessee becomes the owner of other real property, and/or stops living on the parcel of land under the land rent lease, the lessee will be required to transition out of the Scheme.

Lessees who become ineligible for the Land Rent Scheme will receive notification from the Commissioner for ACT Revenue and will be required to transition out of the Land Rent Scheme over the following two year period. This can occur by either purchasing the land outright from the Government, or transferring the lease to another eligible applicant who meets the eligibility criteria for the discounted land rent.

Should a land rent lessee return to eligibility during this two year transition period (for example, a reduction in income or the sale of other owned property), they should contact the ACT Revenue Office immediately.

Restriction on Transfer – Leases first granted on or after 1 October 2013

Should a lessee wish to transfer a land rent block where the Crown lease was first granted under a contract entered into on or after 1 October 2013, the transfer must be to another eligible transferee (being someone who meets the three eligibility criteria shown above).  The prospective transferee will need to contact the ACT Revenue Office to determine if their income is below the relevant threshold amount.

If a lessee who has settled on a land rent block converts the land rent lease to a nominal rent lease (either at the time of on-sale or earlier), the restriction on transfer will not apply.

Land Rent Leases – first granted prior to 1 October 2013

Lessees who have entered the Land Rent Scheme prior to 1 October 2013, via a land rent Crown lease first granted under a contract entered into prior to this date, will continue to participate in land rent under the arrangements in place at the time of entering the land rent lease.  That is, any changes to the Scheme made on or after 1 October 2013 will not affect land rent lessees already participating in land rent prior to this date.  This includes those lessees who exchanged contracts with the Land Development Agency for a land rent block before 1 October 2013, but are yet to settle on the purchase.

Existing land rent lessees will have access to both the standard land rent rate of 4 per cent and the discount rate of 2 per cent, depending on their circumstances.  Existing lessees will also have no restriction on transfer of the lease.

Lessees who entered the Land Rent Scheme (through a grant or transfer of the block) prior to 1 October 2013 have different eligibility criteria for the discounted land rent rate to those land rent Crown leases first granted under a contract entered into after this date.  Lessees who entered the Land Rent Scheme via a land rent Crown lease first granted under a contract entered into prior to 1 October 2013, or via a transfer of such a block, will continue to be assessed on lessee income only, and the income threshold relating to post-1 October 2013 leases (which is based on household income) does not apply.

Land Rent Payable – Leases first granted prior to 1 October 2013

Land rent lessees who participate in the Scheme under a land rent Crown lease first issued under a contract entered into prior to 1 October 2013 are able to access both the discount and standard rate of land rent.

The discount land rent rate is 2 per cent of the unimproved value of the leased land. For further details of how the unimproved land value is determined see Land valuations

The standard land rent rate is 4 per cent of the unimproved value of the leased land. 

When a land rent lease is granted, lessees will commence on the standard land rent rate.  Lessees who are eligible for the discounted land rent rate must apply to the Commissioner for ACT Revenue using the Application for discount land rent (for land rent leases first granted prior to 1 October 2013) (external site).  The discount land rent rate will apply from the date that the application for discounted land rent was received by the Commissioner from eligible lessees.

Eligibility for Discount Land Rent Rate – Leases first granted prior to 1 October 2013

For those lessees who have a land rent block where the Crown lease was first granted under a contract entered into prior to 1 October 2013, the eligibility criteria for discounted land rent in  2015-16 are as follows:

  • Income: the total annual income of all lessees for the previous financial year must not exceed the income threshold amount as shown below.  The income is assessed based on lessee income only and does NOT include the income of any domestic partner:
Number of dependent ChildrenTotal gross income threshold
0$97,900
1$101,230 
2$104,560
3$107,890
4$111,220
5 or more$114,550
  • Refer to DI2015-165 (Amounts Payable – Land Rent) for further information.
  • Property Ownership: lessees cannot own any other real property to remain eligible for the discount rate of land rent.  Should a lessee acquire any other real property at any time during the land rent lease, they must pay the standard rate of land rent.  Ownership includes a legal and a beneficial interest.
  • Residency: at least one of the lessees must reside in the property once a Certificate of Occupancy has been issued.  Should a lessee fail to reside in the subject property, they must pay the standard rate of land rent.

Application Process for Discount Land Rent – entered prior to 1 October 2013

For any enquiries about the application process, please contact the ACT Revenue Office.

Applicants:

Annual Review - Leases first granted prior to 1 October 2013

Lessees who obtained a land rent block where the Crown lease was first granted under a contract entered into prior to 1 October 2013 and who have been approved for the discount rate of land rent are required to confirm by 30 September each year that their annual income has remained under the applicable income threshold amount using the Annual review of Eligibility for Discounted Land Rent (for lessees who entered the Land Rent Scheme under a land rent lease first granted prior to 1 October 2013) (external site) .

An annual review of lessees' income will be conducted to determine their continuing eligibility for discounted land rent. The standard rate of land rent as set by DI2015-176 at 4 per cent of the unimproved value of the leased land applies where the lessees are no longer eligible for discounted land rent for any of the following reasons:

  1. the lessees' total income exceeds the income threshold;
  2. if a Certificate of Occupancy has been issued—the lessees fail to take up residency or all of the lessees move out of the property; 
  3. any one of the lessees purchases other real property.

Application Process for Discount Land Rent - Leases first granted on or after 1 October 2013

For any enquiries about the application process, please contact the ACT Revenue Office.  Applicants (and any domestic partners):

Annual Review - Leases first granted on or after 1 October 2013

Lessees who obtain a land rent block where the Crown lease was first granted under a contract entered into on or after 1 October 2013 must continue to meet the eligibility criteria for the discount rate of land rent to remain in the Scheme. Lessees are required to confirm by 30 September each year that their annual income has remained under the applicable income threshold using the Annual Review of Eligibility for Discount Land Rent (for lessees who entered the Land Rent Scheme under a land rent lease first granted on or after 1 October 2013) (external site).

An annual review of lessees' income will be conducted to determine continuing eligibility for the land rent Scheme. Lessees will not be eligible to pay land rent if any of the following happens:

  1. the total income of the lessee/s and their domestic partner (household income) exceeds the income threshold amount for 2 consecutive years;
  2. any of the lessees becomes the owner of other real property;
  3. if a Certificate of Occupancy is issued for the lease – the lessees fail to take up residency or all of the lessees move out of the property;

Application Processing Time – All Applications

The current standard for processing applications is 10 working days from the provision of all required documentation. If you lodge an application, please wait 10 working days before checking on the status of your application.

Annual Land Rent Increases

To protect lessees from large rental increases attributable to increases in unimproved land values, annual rent increases will be capped by wages growth.  Land rent is an annual charge billed quarterly; however, lessees have the option of paying weekly, fortnightly, monthly or quarterly.

Conversion of Entitlement

Lessees have the option of converting the land rent lease to a nominal crown lease at any time.  The amount payable to convert the lease from a land rent lease to a nominal crown lease will be based on the unimproved market value of the land at the time of conversion i.e. not the original value when the land rent lease was entered into.  Land rent payments do not contribute towards the amount required to convert the lease from a land rent lease to a nominal crown lease.

Should you wish to purchase the land rent block from the Government, you should contact the ACT Planning and Land Authority (external site) for further information. Please note that there may be fees associated with this process.

Interest

If payment of land rent is not received by the due date you will be charged interest on any amount that remains unpaid, on a compounding monthly basis. Interest charges that may be subject to change during the year are imposed on unpaid amounts on the 16th day of each month.

Online Payment

Contact Information

  • Discounted land rent and duty liability for land rent leases

For all enquiries about the application for discounted land rent, annual review of eligibility for discounted land rent, and the duty liability on the purchase of a land rent lease contact the ACT Revenue Office.

  • Availability of land

For all enquiries about the availability of land under the Land Rent Scheme contact the Land Development Agency (external site).

  • Canberra Institute of Technology sessions

Each potential lessee must attend a Canberra Institute of Technology (CIT) information session prior to applying for a land rent lease. To register for the CIT information sessions contact the CIT as follows:

Email: infoline@cit.edu.au
Phone: 02 6207 3188

Opening hours for phone contact (excluding ACT public holidays):
Monday to Thursday: 9am to 5pm AEST
Friday: 10am to 4:00pm AEST

Relevant links

For further information on other benefits available to home owners in the ACT, see Home Buyer Assistance.

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